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Assume the perpetual inventory method is used. 1) The company purchased $13,900 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,400 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $21,800 cash. The amount of gross margin from the four transactions is:

$11,510. Explanation: Cost of goods sold = ($13,900 - $3,400) x 0.98 = $10,290. Sales revenue $21,800 - Cost of goods sold $10,290 = $11,510.

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 = 400 units @ $2.40 First purchase @ May 7 = 500 units @ $2.60 Second purchase @ May 17 = 700 units @ $2.70 Third purchase @ May 23 = 300 units @ $2.80 Sales @ May 31 = 1,500 units @ $4.30 Determine the amount of gross margin assuming the weighted average cost flow method. (Round your intermediate calculations to 2 decimal places.)

$2,505. Explanation: [(400 x $2.40) + (500 x $2.60) + (700 x $2.70) + (300 x $2.80)] / 1,900 units = $2.63 per unit. (1,500 x $4.30) - (1,500 x $2.63) = $2,505.

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 = 100 units @ $4.00 First purchase @ May 7 = 300 units @ $4.40 Second purchase @ May 17 = 500 units @ $4.60 Third purchase purchase @ May 23 = 100 units @ $4.80 Sales @ May 31 = 900 units @ $7.80 Determine the amount of gross margin assuming the weighted average cost flow method.

$2,970. Explanation: [(100 x $4.00) + (300 x $4.40) + (500 x $4.60) + (100 x $4.80)] / 1,000 units = $4.50 per unit. (900 x $7.80) - (900 x $4.50) = $2,610.

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 = 400 units @ $2.40 First purchase @ May 7 = 500 units @ $2.60 Second purchase @ May 17 = 700 units @ $2.70 Third purchase @ May 23 = 300 units @ $2.80 Sales @ May 31 = 1,500 units @ $4.30 Determine the amount of cost of goods sold assuming the LIFO cost flow method.

$4,030. Explanation: (300 x $2.80) + (700 x $2.70) + (500 x $2.60) = $4,030.

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 = 1,100 units @ $3.80 First purchase @ May 7 = 1,200 units @ $4.00 Second purchase @ May 17 = 1,400 units @ $4.10 Third purchase @ May 23 = 1,000 units @ $4.20 Sales @ May 31 = 3,600 units @ $5.70 Determine the amount of ending inventory assuming the FIFO cost flow method.

$4,610. Explanation: 4,700 units available for sale - 3,600 units sold = 1,100 units in ending inventory. (1,000 x $4.20) + (100 x $4.10) = $4,610.

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 = 100 units @ $4.00 First purchase @ May 7 = 300 units @ $4.40 Second purchase @ May 17 = 500 units @ $4.60 Third purchase @ May 23 = 100 units @ $4.80 Sales @ May 31 = 900 units @ $7.80 Determine the weighted average cost per unit for May.

$4.50. Explanation: [(100 x $4.00) + (300 x $4.40) + (500 x $4.60) + (100 x $4.80)] / 1,000 units = $4.50 per unit.

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 = 1,300 units @ $4.20 First purchase @ May 7 = 1,400 units @ $4.40 Second purchase @ May 17 = 1,600 units @ $4.50 Third purchase @ May 23 = 1,200 units @ $4.60 Sales @ May 31 = 4,200 units @ $6.10 Determine the amount of gross margin assuming the FIFO cost flow method.

$7,250. Explanation: (1,300 x $4.20) + (1,400 x $4.40) + (1,500 x $4.50) = $18,370 cost of goods sold. $25,620 sales - $18,370 cost of goods sold = $7,250.

Koontz Company uses the perpetual inventory method. On January 1, Year 1, the company's first day of operations, Koontz purchased 1,150 units of inventory that cost $5.50 each. On January 10, Year 1, the company purchased an additional 1,400 units of inventory that cost $7.50 each. If Koontz uses a weighted average cost flow method and sells 1,300 units of inventory, the amount of inventory appearing on balance sheet following the sale will be approximately: (Round your intermediate calculations to one decimal place.)

$8,250. Explanation: 1,150 units + 1,400 units - 1,300 units sold = 1,250 units in ending inventory. [(1,150 x $5.50) + (1,400 x $7.50)] / 2,550 = $6.60 per unit. 1,250 units x $6.60 = $8,250.

Anton Co. uses the perpetual inventory method. Anton purchased 680 units of inventory that cost $8 each. At a later date the company purchased an additional 810 units of inventory that cost $10 each. If Anton uses the FIFO cost flow method and sells 1,050 units of inventory, the amount of cost of goods sold will be:

$9,140. Explanation: (680 x $8) + (370 x $10) = $9,140.

Anton Co. uses the perpetual inventory method. Anton purchased 400 units of inventory that cost $12.00 each. At a later date the company purchased an additional 600 units of inventory that cost $16.00 each. If Anton uses the FIFO cost flow method and sells 700 units of inventory, the amount of cost of goods sold will be:

$9,600. Explanation: (400 x $12.00) + (300 x $16.00) = $9,600.

On January 1, Year 2, Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $104,000 of service on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account. Based on this information, the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows is:

$97,000. Explanation: $97,000 cash collected from accounts receivable is a cash inflow for operating activities.

On December 31, 2015, Owings Corporation overstates the ending inventory account by $5,000. How will this affect Retained Earnings in the December 31, 2016 balance sheet? A. Retained Earnings will be correctly stated. B. Retained Earnings will be understated by $5,000. C. Retained Earnings will be overstated by $5,000. D. Cannot be determined with the above information.

An error that results in overstating ending inventory would have what effect on the company's financial statements in the current year? Assets = Liabilities + Equity Revenue - Expenses = Net Inc. Cash A. + = NA + + NA - - = + NA B. - = NA + - NA - + = - NA C. + = NA + + NA - NA = NA +OA D. + = + + NA NA - + = - +OA

Blake Company purchased two identical inventory items. The item purchased first cost $16.00, and the item purchased second cost $18.00. Blake sold one of the items for $24.00. Which of the following statements is true? A. Ending inventory will be lower if Blake uses weighted average than if FIFO were used. B. Cost of goods sold will be higher if Blake uses FIFO than if weighted average were used. C. The dollar amount assigned to ending inventory will be the same no matter which cost flow method is used. D. Gross margin will be higher if Blake uses LIFO than it would be if FIFO were used.

Carson Company has an inventory turnover of 12.75, and its inventory amounts to $2,400,000. What is the amount of cost of goods sold? A. $30,600,000 B. $188,235 C. $26,666,667 D. $51,000

Chase Co. uses the perpetual inventory method. The inventory records for Chase reflected the following Jan 1 Beg Inv 300 @ 2.30 Jan 12 Purchase 400 @2.10 Jan 18 Sales 500 @ 3.80 Jan 21 Purchase 300 @ 2.40 Jan 25 Purchase 100 @ 2.20 Jan 31 Sales 450 @ 3.80 Assuming Chase uses a FIFO cost flow method, the cost of goods sold for the sales transaction on January 31 is: A. $1,020. B. $1,005. C. $1,045. D. $340.

Inventory turnover is calculated by dividing: A. cost of goods sold by inventory. B. sales by inventory. C. beginning inventory by the ending inventory. D. inventory by cost of goods sold.

Koontz Company uses the perpetual inventory method. On January 1, 2016, the company's first day of operations, Koontz purchased 400 units of inventory that cost $7.50 each. On January 10, 2016, the company purchased an additional 600 units of inventory that cost $9.00 each. If Koontz uses a weighted average cost flow method and sells 550 units of inventory, the amount of inventory appearing on balance sheet following the sale will be approximately: A. $3,780. B. $4,738. C. $3,080. D. $3,713.

Nelson Corporation is required to record an inventory write-down of $2,500 as a result of using the lower-of-cost-or-market rule. Which of the following answers correctly shows how this entry would affect the financial statements? Assets = Liabilities + Equity Revenue - Expenses = Net Inc. Cash A. (2,500) = NA + (2,500) NA - 2,500 = (2,500) NA B. (2,500) = (2,500) + NA NA - NA = NA NA C. NA = (2,500) + 2,500 2,500 - NA = 2,500 NA D. (2,500) = NA + (2,500) NA - 2,500 = (2,500) (2,500)

Phipps Corporation overstated its ending inventory on December 31, 2015. Which of the following answers correctly identifies the effect of the error on 2016 financial statements? A. Cost of goods sold is overstated. B. Gross margin overstated. C. Ending inventory is understated. D. Net income is overstated.

Stubbs Company uses the perpetual inventory method. On January 1, 2016, Stubbs purchased 400 units of inventory that cost $8.00 each. On January 10, 2016, the company purchased an additional 600 units of inventory that cost $9.00 each. If Stubbs uses a weighted average cost flow method and sells 700 units of inventory for $16.00 each, the amount of gross margin reported on the income statement will be: A. $5,180. B. $5,250. C. $5,000. D. $6,020.

The inventory records for Radford Co reflected the following Beg Inv May 1 100 units @ 4.00 First Purchase @ May 7 300 units @ 4.40 Second Purchase @ May 17 500 units @ 4.60 Third Purchase @ May 23 100 units @ 4.80 Sales @ May 31 900 units @ 7.80 Determine the amount of cost of goods sold assuming the LIFO cost flow method. A. $4,100 B. $4,320 C. $2,360 D. $3,600

The inventory records for Radford Co reflected the following Beg Inv May 1 100 units @ 4.00 First Purchase @ May 7 300 units @ 4.40 Second Purchase @ May 17 500 units @ 4.60 Third Purchase @ May 23 100 units @ 4.80 Sales @ May 31 900 units @ 7.80 Determine the amount of ending inventory assuming the FIFO cost flow method. A. $480 B. $440 C. $400 D. $940

Vargas Company uses the perpetual inventory method. Vargas purchased 400 units of inventory that cost $15.00 each. At a later date the company purchased an additional 800 units of inventory that cost $18.00 each. Vargas sold 500 units of inventory for $27.00. If Vargas uses a FIFO cost flow method, the amount of cost of goods sold appearing on the income statement will be: A. $7,800. B. $6,000. C. $4,500. D. $5,700.

When prices are rising, which method of inventory, if any, will result in the lowest relative net cash outflow (including the effects of taxes, if any)? A. LIFO. B. FIFO. C. Weighted average D. None of these; inventory methods cannot affect cash flows.

Which of the following businesses is most likely to use a specific identification cost flow method? A. Car dealership B. Grocery store C. Hardware store D. Roofing company

Which of the following circumstances is not a reason to compute an estimate of the amount of inventory? A. To complete the company's annual income tax return. B. To evaluate the accuracy of a physical count of goods. C. To prepare monthly or quarterly financial statements without incurring the expense of taking a physical inventory. D. To support an insurance claim for a loss due to theft of inventory.

Which of the following statements is not correct in regard to the importance of inventory turnover to a company's profitability? A. Most companies prefer to have a low inventory turnover than a high inventory turnover. B. It is sometimes more desirable to sell a large amount of merchandise with a small amount of gross margin than a small amount of merchandise with a large amount of gross margin. C. A company's profitability is affected by how rapidly inventory sells. D. A company's profitability is affected by the spread between cost and selling price.

50) The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 100 units @ $ 4.00 First purchase @ May 7 300 units @ $ 4.40 second purchase @ May 17 500 units @ $ 4.60 Third purchase @ May 23 100 units @ $ 4.80 Sales @ May 31 900 units @ $ 7.80 Determine the amount of cost of goods sold assuming the LIFO cost flow method.

A) $4,100

65) Chase Co. uses the perpetual inventory method. The inventory records for Chase reflected the following Jan 1 Beginning inventory 300 units @ $ 2.30 Jan 12 Purchase 400 units @ $ 2.10 Jan 18 Sales 500 units @ $ 3.80 Jan 21 Purchase 300 units @ $ 2.40 Jan 25 Purchase 100 units @ $ 2.20 Jan 31 Sales 450 units @ $ 3.80 Assuming Chase uses a FIFO cost flow method, the cost of goods sold for the sales transaction on January 31 is:

A) $1,020.

16) Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $23,000 and $900, respectively. During Year 2, Allegheny wrote off $1,500 of Uncollectible Accounts. After aging its receivables, Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $1,600. What will Allegheny report as Uncollectible Accounts Expense on its Year 2 income statement?

A) $2,200

58) Koontz Company uses the perpetual inventory method. On January 1, Year 1, the company's first day of operations, Koontz purchased 400 units of inventory that cost $7.50 each. On January 10, Year 1, the company purchased an additional 600 units of inventory that cost $9.00 each. If Koontz uses a weighted average cost flow method and sells 550 units of inventory, the amount of inventory appearing on balance sheet following the sale will be approximately:

A) $3,780.

20) Hancock Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $160,000 of revenue on account during Year 1. During Year 1, Hancock collected $128,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 1% of revenue on account. The amount of net realizable value of receivables on the December 31, Year 1 balance sheet would be:

A) $30,400.

51) The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 100 units @ $ 4.00 First purchase @ May 7 300 units @ $ 4.40 second purchase @ May 17 500 units @ $ 4.60 Third purchase @ May 23 100 units @ $ 4.80 Sales @ May 31 900 units @ $ 7.80 Determine the amount of ending inventory assuming the FIFO cost flow method.

A) $480

59) Stubbs Company uses the perpetual inventory method. On January 1, Year 1, Stubbs purchased 400 units of inventory that cost $8.00 each. On January 10, Year 1, the company purchased an additional 600 units of inventory that cost $9.00 each. If Stubbs uses a weighted average cost flow method and sells 700 units of inventory for $16.00 each, the amount of gross margin reported on the income statement will be:

A) $5,180.

5) The Miller Company earned $190,000 of revenue on account during Year 2. There was no beginning balance in the accounts receivable and allowance accounts. During Year 2, Miller collected $136,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. The amount of uncollectible accounts expense recognized on the Year 2 income statement was: A) $5,700.

A) $5,700.

15) Domino Company uses the aging of accounts receivable method to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $76,500 and $5,800, respectively. During the year, the company wrote off $4,640 in uncollectible accounts. In preparation for the company's Year 2 estimate, Domino prepared the following aging schedule: Number of days Receivables % Likely to be past due amount uncollectible Current $ 104,000 1 % 0-30 45,000 5 % 31-60 9,920 10 % 61-90 4,440 25 % Over 90 3,800 50 % Total $ 167,160 What will Domino record as Uncollectible Accounts Expense for Year 2?

A) $6,132

61) Vargas Company uses the perpetual inventory method. Vargas purchased 400 units of inventory that cost $15.00 each. At a later date the company purchased an additional 800 units of inventory that cost $18.00 each. Vargas sold 500 units of inventory for $27.00. If Vargas uses a FIFO cost flow method, the amount of cost of goods sold appearing on the income statement will be:

A) $7,800.

3) On January 1, Year 2, Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $104,000 of service on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account.Based on this information, the amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows is:

A) $97,000.

62) Which of the following businesses is most likely to use a specific identification cost flow method?

A) Car dealership

41) Blake Company purchased two identical inventory items. The item purchased first cost $16.00, and the item purchased second cost $18.00. Blake sold one of the items for $24.00. Which of the following statements is true?

A) Ending inventory will be lower if Blake uses weighted average than if FIFO were used.

39) When prices are rising, which method of inventory, if any, will result in the lowest relative net cash outflow (including the effects of taxes, if any)?

A) LIFO.

26) On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following answers correctly states the effect of Loudoun Company's February Year 2 entry to write off the customer's account? Assets = Liab. + Equity Re v. − Expenses = Net Inc. Cash Flow A. NA = NA + NA NA − NA = NA NA B. (1,050 ) = NA + (1,050 ) (1,050 ) − NA = (1,050 ) NA C. (1,050 ) = (1,050 ) + NA NA − NA = NA NA D. NA = 1,050 + (1,050 ) NA − 1,050 = (1,050 ) NA

A) Option A

33) The Yankee Corporation has recently begun to accept credit cards. On July 7, Yankee made a credit card sale of $600. The credit card company charges a fee of 3%. Which of the following answers correctly describes the effect of the collection of cash from the credit card company on the financial statements of Yankee Corporation? Assets = Liab. + Equity Rev. − Expenses = Net Inc. Cash Flow A. NA = NA + NA NA − NA = NA 582 OA B. 582 = NA + NA 582 − NA = 582 582 OA C. NA = NA + NA NA − NA = NA NA D. 582 = 582 + NA NA − NA = NA 582 OA

A) Option A

24) The net effect of the entries to recognize the receipt of a previously written-off account under the allowance method is to:

A) have no effect on total assets or total equity.

23) The primary reason for a business to allow customers to purchase goods or services on account is to:

A) increase sales.

Use the following account numbers and corresponding account titles to answer the following question. Account (1) - Cash Account (2) - Merchandise inventory Account (3) - Cost of goods sold Account (4) - Transportation-out Account (5) - Dividends Account (6) - Common stock Account (7) - Selling expense Account (8) - Loss on the sale of land Account (9) - Sales Which accounts would appear on the balance sheet?

Account numbers 1, 2, and 6. Explanation: Cash, merchandise inventory, and common stock are all balance sheet accounts.

Which of the following is considered a period cost?

Advertising expense for the current month. Explanation: Advertising expense is a selling and administrative expense, or period cost.

Yowell Company granted a sales discount of $360 to a customer when it collected the amount due on account. Yowell uses the perpetual inventory system. Which of the following answers reflects the effects on the financial statements of only the discount?

Assets = (360) Liab. = NA Equity = (360) Rev. = (360) Exp. = NA Net Inc. = (360) Cash Flow = NA Explanation: Yowell will reduce its assets (accounts receivable) and equity (sales revenue) when it grants the sales discount. The discount itself does not affect the statement of cash flows. However, cash flows will be affected when the payment is recorded.

Assume the perpetual inventory method is used. 1) The company purchased $12,200 of merchandise on account under terms 2/10, n/30. 2) The company returned $1,700 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $18,400 cash. What effect will the return of merchandise to the supplier have on the accounting equation?

Assets and liabilities are reduced by $1,700. Explanation: The purchase return will decrease assets (merchandise inventory and decrease liabilities (accounts payable) by $1,700, the full invoiced amount of the merchandise returned.

Account Comp X Comp Y Comp Z CGS 1980000 4338000 3234000 Inventory 175000 295000 250500 The average number of days to sell inventory for Company Y is approximately: A. 15.3 B. 24.8 C. 23.9 D. 25.6

An overstatement of ending inventory results in which of the following in the present period? A. Overstatement of cost of goods sold. B. Overstatement of total assets. C. Understatement of net income . D. Understatement of retained earnings.

Chase Co. uses the perpetual inventory method. The inventory records for Chase reflected the following Jan 1 Beg Inv 300 @ 2.30 Jan 12 Purchase 400 @2.10 Jan 18 Sales 500 @ 3.80 Jan 21 Purchase 300 @ 2.40 Jan 25 Purchase 100 @ 2.20 Jan 31 Sales 450 @ 3.80 Assuming Chase uses a FIFO cost flow method, the ending inventory on January 31 is: A. $345. B. $340. C. $330. D. $1,020.

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each. During the period, the company purchased inventory items as follows Purchase 1 200 @ 9.00 Purchase 2 150 @ 9.30 Purchase 3 50 @ 10.50 Glasgow sold 220 units after purchase 3 for $17.00 each. Glasgow's cost of goods sold under FIFO would be: A. $1,650. B. $1,860. C. $2,310. D. $2,100.

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each. During the period, the company purchased inventory items as follows Purchase 1 200 @ 9.00 Purchase 2 150 @ 9.30 Purchase 3 50 @ 10.50 Glasgow sold 220 units after purchase 3 for $17.00 each. Glasgow's ending inventory under weighted average would be approximately: A. $2,361. B. $2,340. C. $1,980. D. $1,998.

Hoover Company purchased two identical inventory items. The item purchased first cost $33.00. The item purchased second cost $35.00. Then Hoover sold one of the inventory items for $62.00. Based on this information: A. the amount of ending inventory is $35.00 if Hoover uses the LIFO cost flow method. B. the amount of gross margin is $28.00 if Hoover uses the weighted average cost flow method. C. the amount of cost of goods sold is $35.00 if Hoover uses the FIFO cost flow method. D. the amount of cost of goods sold is $33.00 if Hoover uses the LIFO cost flow method.

If prices are rising, which inventory cost flow method will produce the lowest amount of cost of goods sold? A. LIFO B. FIFO C. Weighted average D. LIFO, FIFO, and weighted average will all produce equal amounts.

Landis Company is preparing its financial statements. Gross margin is normally 40% of sales. Information taken from the company's records revealed sales of $25,000; beginning inventory of $2,500 and purchases of $17,500. The estimated amount of ending inventory would be: A. $15,000. B. $5,000. C. $8,000 . D. $10,000.

Misty Mountain Outfitters is a merchandiser of specialized fly fishing gear. Its cost of goods sold for 2016 was $295,000, and sales were $690,000. The amount of merchandise on hand was $50,000, and total assets amounted to $585,000. Using this information, which of the following answers correctly states the average days in inventory ratio? Round to the nearest day. A. 26 days B. 62 days C. 31 days D. 40 days

Poole Company purchased two identical inventory items. One of the items, purchased in January, cost $4.50. The other, purchased in February, cost $4.75. One of the items was sold in March at a selling price of $7.50. Select the correct answer assuming that Poole uses a LIFO cost flow. A. The balance in ending inventory would be $4.75. B. The amount of gross margin would be $2.75. C. The amount of ending inventory would be $4.625 . D. The amount of cost of goods sold would be $4.50.

The Bradford Company was recently required to record an inventory write-down of $5,200 because the market value of its inventory was less than cost. Assuming the amount of the write-down is not material (the total inventory was over $9,750,000), which of the following is the appropriate journal entry? A. Sales DR 5200 Inventory CR 5200 B. CGS DR 5200 Inventory CR 5200 C. Inventory DR 5200 Sales CR 5200 D. CGS DR 5200 Sales CR 5200

The gross margin method requires all but which of the following elements of information? A. Total sales for the present period. B. The ending inventory for the present period . C. Amount of purchases during the present period. D. The beginning inventory for the present period.

The inventory records for Radford Co reflected the following Beg Inv May 1 100 units @ 4.00 First Purchase @ May 7 300 units @ 4.40 Second Purchase @ May 17 500 units @ 4.60 Third Purchase @ May 23 100 units @ 4.80 Sales @ May 31 900 units @ 7.80 Determine the weighted average cost per unit (rounded) for May. A. $4.45 B. $4.50 C. $5.12 D. $6.34

Under the perpetual inventory system, the best estimate of the amount of inventory is: A. shown on the previous period's financial statements. B. the book balance in the inventory account. C. provided by application of the gross margin method. D. the beginning inventory balance minus sales for the period.

54) Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each. During the period, the company purchased inventory items as follows. Glasgow sold 220 units after purchase 3 for $17.00 each. Purchase No. of items Cost 1 200 $ 9.00 2 150 $ 9.30 3 50 $ 10.50 Glasgow's cost of goods sold under FIFO would be:

B) $1,860.

56) Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each. During the period, the company purchased inventory items as follows. Glasgow sold 220 units after purchase 3 for $17.00 each. Purchase No. of items Cost 1 200 $ 9.00 2 150 $ 9.30 3 50 $ 10.50 Glasgow's ending inventory under weighted average would be approximately:

B) $2,340.

11) On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During the year Kincaid reported $72,500 of credit sales. Kincaid wrote off $550 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $74,550. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. The net realizable value of receivables appearing on Kincaid's Year 2 balance sheet will amount to:

B) $27,725.

66) Chase Co. uses the perpetual inventory method. The inventory records for Chase reflected the following Jan 1 Beginning inventory 300 units @ $ 2.30 Jan 12 Purchase 400 units @ $ 2.10 Jan 18 Sales 500 units @ $ 3.80 Jan 21 Purchase 300 units @ $ 2.40 Jan 25 Purchase 100 units @ $ 2.20 Jan 31 Sales 450 units @ $ 3.80 Assuming Chase uses a FIFO cost flow method, the ending inventory on January 31 is:

B) $340.

49) The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 100 units @ $ 4.00 First purchase @ May 7 300 units @ $ 4.40 second purchase @ May 17 500 units @ $ 4.60 Third purchase @ May 23 100 units @ $ 4.80 Sales @ May 31 900 units @ $ 7.80 Determine the weighted average cost per unit for May.

B) $4.50

8) On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During the year Kincaid reported $72,500 of credit sales. Kincaid wrote off $550 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $74,550. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. The amount of uncollectible accounts expense recognized in the Year 2 income statement will be:

B) $725.

43) If prices are rising, which inventory cost flow method will produce the lowest amount of cost of goods sold?

B) FIFO

25) On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following answers correctly states the effect of the December 31, Year 1 adjusting entry for uncollectible accounts on the financial statements of the Loudoun Corporation? Assets = Liab. + Equity Rev. − Expenses = Net Inc. Cash Flow A. (3,375 ) = 3,375 + NA NA − NA = NA NA B. (3,375 ) = NA + (3,375 ) NA − 3,375 = (3,375 ) NA C. 3,375 = NA + 3,375 NA − (3,375 ) = 3,375 3,375 OA D. NA = NA + NA NA − NA = NA NA

B) Option B

31) Buttercup Florist uses the allowance method to account for uncollectible accounts. Unable to collect a $150 account from a customer, Buttercup determined it was uncollectible. How would the write-off of this account affect the company's financial statements? Assets = Liab. + Equity Rev. − Expenses = Net Inc. Cash Flow A. − = − + NA NA − Na = NA − OA B. NA = NA + NA NA − NA = NA NA C. − = + + NA NA − NA = NA − FA D. NA = − + − NA − + = − NA

B) Option B

21) Which one of the following is not an accurate description of the Allowance for Doubtful Accounts?

B) The account is a temporary account.

57) Poole Company purchased two identical inventory items. One of the items, purchased in January, cost $4.50. The other, purchased in February, cost $4.75. One of the items was sold in March at a selling price of $7.50. Assuming that Poole uses a LIFO cost flow, which of the following statements is correct?

B) The amount of gross margin would be $2.75.

17) The practice of reporting the net realizable value of receivables in the financial statements is commonly called the:

B) allowance method of accounting for uncollectible accounts.

47) Hoover Company purchased two identical inventory items. The item purchased first cost $33.00. The item purchased second cost $35.00. Then Hoover sold one of the inventory items for $62.00. Based on this information, the amount of:

B) gross margin is $28.00 if Hoover uses the weighted average cost flow method.

Account Comp X Comp Y Comp Z CGS 1980000 4338000 3234000 Inventory 175000 295000 250500 Given that longer inventory holding periods act to increase expenses, which of the three companies would be expected to have the lowest inventory holding cost? A. All three companies have equal holding costs B. Company X C. Company Y D. Company Z

At a time of declining prices, which cost flow assumption will result in the highest ending inventory? A. Weighted average B. FIFO C. LIFO D. Either weighted average or FIFO

Chase Co. uses the perpetual inventory method. The inventory records for Chase reflected the following Jan 1 Beg Inv 300 @ 2.30 Jan 12 Purchase 400 @2.10 Jan 18 Sales 500 @ 3.80 Jan 21 Purchase 300 @ 2.40 Jan 25 Purchase 100 @ 2.20 Jan 31 Sales 450 @ 3.80 Assuming Chase uses a LIFO cost flow method, the amount of cost of goods sold for the sales transaction on January 18 is (round the final result to the nearest whole dollar): A. $1,150. B. $1,050. C. $1,070 . D. $1,130.

Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each. During the period, the company purchased inventory items as follows Purchase 1 200 @ 9.00 Purchase 2 150 @ 9.30 Purchase 3 50 @ 10.50 Glasgow sold 220 units after purchase 3 for $17.00 each. Glasgow's ending inventory under LIFO would be: A. $2,730. B. $2,460. C. $2,220. D. $1,950.

Taylor Co. had beginning inventory of $400 and ending inventory of $600. Taylor Co. had cost of goods sold amounting to $1,800. Based on this information, Taylor Co. must have purchased inventory amounting to: A. $1,600 B. $2,800 C. $2,000 D. $2,400

Tetra Company purchased 2,000 units of inventory that cost $4.00 each on January 1, 2016. An additional 3,000 units of inventory were purchased on January 12, 2016 at a cost of $4.20 each. Tetra Company sold 4,000 units of inventory on January 20, 2016. Which of the following entries would be required to recognize the cost of goods sold assuming that Tetra Co. uses the perpetual inventory method and a FIFO cost flow method? A. Inventory DR 16400 CGS CR 16400 B. CGS DR 16600 Inventory CR 16600 C. CGS DR 16400 Inventory CR 16400 D. Inventory DR 16600 CGS CR 16600

The inventory records for Radford Co reflected the following Beg Inv May 1 100 units @ 4.00 First Purchase @ May 7 300 units @ 4.40 Second Purchase @ May 17 500 units @ 4.60 Third Purchase @ May 23 100 units @ 4.80 Sales @ May 31 900 units @ 7.80 Determine the amount of gross margin assuming the FIFO cost flow method. A. $2,920 B. $3,420 C. $3,000 D. $4,020

What is meant by "market" in lower-of-cost-or-market calculations? A. The amount of gross margin earned by selling merchandise. B. The amount the goods were sold for during the period. C. The amount that would have to be paid to replace the merchandise. D. The amount originally paid for the merchandise.

When preparing its quarterly financial statements, Pace Co. uses the gross margin method to estimate ending inventory. The following information is available for the 1st quarter of 2016: Beg Inv 110,000 Purchases 385,000 Sales 525,000 Estimated gross margin percentage 45% What was Pace's estimated inventory on March 31, 2016? A. $236,250 B. $288,750 C. $206,250 D. $258,750

When prices are falling: A. LIFO will result in lower income and a lower inventory valuation than will FIFO. B. LIFO will result in lower income and a higher inventory valuation than will FIFO. C. LIFO will result in higher income and a higher inventory valuation than will FIFO. D. LIFO will result in higher income and a lower inventory valuation than will FIFO.

When the cost of purchasing inventory is declining, which inventory cost flow method will produce the highest amount of cost of goods sold? A. Weighted average B. LIFO C. FIFO D. LIFO, FIFO, and weighted average will all produce the same amount of cost of goods sold.

Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value? A. Weighted average. B. Specific identification. C. LIFO . D. FIFO.

Why are the inventory and cost of goods sold accounts attractive targets for managerial fraud? A. There are few if any procedures that can check for fraud in these accounts. B. There are no adequate methods of record keeping for inventory. C. These accounts are more significant than most other accounts. D. Cost of goods sold and Inventory accounts are not attractive targets of fraud.

64) Chase Co. uses the perpetual inventory method. The inventory records for Chase reflected the following Jan 1 Beginning inventory 300 units @ $ 2.30 Jan 12 Purchase 400 units @ $ 2.10 Jan 18 Sales 500 units @ $ 3.80 Jan 21 Purchase 300 units @ $ 2.40 Jan 25 Purchase 100 units @ $ 2.20 Jan 31 Sales 450 units @ $ 3.80 Assuming Chase uses a LIFO cost flow method, the amount of cost of goods sold for the sales transaction on January 18 is:

C) $1,070.

4) On January 1, Year 2, Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $104,000 of service on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account. The amount of uncollectible accounts expense recognized on the Year 2 income statement is:

C) $2,080.

55) Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each. During the period, the company purchased inventory items as follows. Glasgow sold 220 units after purchase 3 for $17.00 each. Purchase No. of items Cost 1 200 $ 9.00 2 150 $ 9.30 3 50 $ 10.50 Glasgow's ending inventory under LIFO would be:

C) $2,220.

53) The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 100 units @ $ 4.00 First purchase @ May 7 300 units @ $ 4.40 second purchase @ May 17 500 units @ $ 4.60 Third purchase @ May 23 100 units @ $ 4.80 Sales @ May 31 900 units @ $ 7.80 Determine the amount of gross margin assuming the FIFO cost flow method.

C) $3,000

45) When the cost of purchasing inventory is declining, which inventory cost flow method will produce the highest amount of cost of goods sold?

C) FIFO

63) Tetra Company purchased 2,000 units of inventory that cost $4.00 each on January 1, Year 1. An additional 3,000 units of inventory were purchased on January 12, Year 1 at a cost of $4.20 each. Tetra Company sold 4,000 units of inventory on January 20, Year 1. Assuming that Tetra Co. uses the perpetual inventory method and a FIFO cost flow method, how would the entry to recognize the cost of goods sold affect the financial statements?

C) Increase cost of goods sold and decrease inventory by $16,400

38) At a time of declining prices, which cost flow assumption will result in the highest ending inventory?

C) LIFO

40) Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value?

C) LIFO.

32) The Yankee Corporation has recently begun to accept credit cards. On July 7, Yankee made a credit card sale of $600. The credit card company charges a fee of 3%. Which of the following correctly shows the effects of the sale on July 7? Assume that the credit card fee is recorded on the date of sale. Assets = Liab. + Equity Rev. − Expenses = Net Inc. Cash Flow A. 600 = 18 + 582 582 − NA = 582 NA B. 582 = NA + 582 600 − 18 = 582 582 OA C. 582 = NA + 582 600 − 18 = 582 NA D. 600 = NA + 600 600 − NA = 600 NA

C) Option C

36) Alberta Company accepts a credit card as payment for $450 of services provided for the customer. The credit card company charges a 4% handling charge for its collection services. Select the answer that shows how the entry to record the sale would affect Alberta's financial statements. Assets = Liab. + Equity Rev. − Expenses = Net Inc. Cash Flow A. 432 = NA + 432 432 − NA = 432 432 OA B. 432 = NA + 432 450 − 18 = 432 432 OA C. 432 = NA + 432 450 − 18 = 432 NA D. 450 = NA + 450 450 − NA = 450 NA

C) Option C

35) Elliston Company accepted credit card payments for $10,000 of services provided to customers. The credit card company charges a 3% service charge. This transaction would increase:

C) Retained Earnings by $9,700.

34) Which of the following is not an advantage of accepting credit cards from retail customers?

C) There are fees charged for the privilege of accepting credit cards.

10) On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During the year Kincaid reported $72,500 of credit sales. Kincaid wrote off $550 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $74,550. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. Kincaid's entry required to recognize the uncollectible accounts expense for Year 2 will:

C) decrease total assets and net income.

42) When prices are falling, LIFO will result in:

C) higher income and a higher inventory valuation than will FIFO.

19) A company that uses the allowance method to account for uncollectible accounts:

C) reports the net realizable value of its accounts receivable on the balance sheet.

The transaction, "provided services for cash," affects which two accounts?

Cash and Revenue. Explanation: Providing services for cash increases a company's assets (cash) and equity (revenue, which closes to retained earnings).

The Miller Company earned $109,000 of revenue on account during 2016. There was no beginning balance in the accounts receivable and allowance accounts. During 2016 Miller collected $75,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. The amount of uncollectible accounts expense recognized on the 2016 income statement was

Correct: $3,270 ***$109,000 revenue on account × 3% = $3,270***

The Miller Company earned $109,000 of revenue on account during 2016. There was no beginning balance in the accounts receivable and allowance accounts. During 2016 Miller collected $75,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. The net realizable value of Miller's receivables at the end of 2016 was

Correct: $30,730 ***$0 beginning balance + $109,000 revenue on account - $75,000 collections = $34,000 ending accounts receivable balance; $0 beginning balance + $3,270 uncollectible accounts expense - $0 write-offs = $3,270 ending allowance for doubtful accounts balance; $34,000 - $3,270 = $30,730 net realizable value***

Rosewood Company made a loan of $10,400 to one of the company's employees on April 1, 2016. The one-year note carried a 6% rate of interest. The amount of interest revenue that Rosewood would report in 2016 and 2017, respectively would be:

Correct: $468, $156 ***$10,400 × 6% × 9/12 months = $468 interest revenue in April - December, 2016; $10,400 × 6% × 3/12 months = $156 interest revenue in January - March, 2017***

Glasgow Enterprises started the period with 60 units in beginning inventory that cost $2.20 each. During the period, the company purchased inventory items as follows Purchase # of Items Cost 1 270 $2.70 2 185 $2.80 3 55 $3.20 Glasgow's cost of goods sold under FIFO would be:

Correct: $753 ***(60 × $2.20) + (230 × $2.70) = $753***

Ballard Company uses the perpetual inventory system. The company purchased $9,700 of merchandise from Andes Company under the terms 3/10, net/30. Ballard paid for the merchandise within 10 days and also paid $420 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $18,400 cash. The amount of gross margin for this merchandise is:

Correct: $8,571 ***Sales $18,400 - Cost of goods sold ($9,700 x 0.97 + $420) = $8,571 Gross margin***

Anton Co. uses the perpetual inventory method. Anton purchased 880 units of inventory that cost $6 each. At a later date the company purchased an additional 960 units of inventory that cost $8 each. If Anton uses the FIFO cost flow method and sells 1,300 units of inventory, the amount of cost of goods sold will be

Correct: $8,640 ***(880 × $6) + (420 × $8) = $8,640***

At March 31, Cummins Co. had a balance in its cash account of $11,200. At the end of March the company determined that it had outstanding checks of $1,275, deposits in transit of $770, a bank service charge of $50, and an NSF check from a customer for $235. The true cash balance at March 31 is:

Correct: 10,915 ***$11,200 unadjusted book balance - $50 service charge - $235 NSF check = $10,915 true cash balance***

The April 30, 2016 bank statement for Trimble Corporation shows an ending balance of $39,603. The unadjusted cash account balance was $33,150. The accountant for Trimble gathered the following information: 1. There was a deposit in transit for $5,232 2. The bank statement reports a service charge of $159 3. A credit memo included in the bank statement shows interest earned of $735 4. Outstanding checks totaled $13,479 5. The bank statement included a $2,370 NSF check deposited in April. What is the true cash balance as of April 30, 2016?

Correct: 31,356 Correct: $31,356 **$39,603 unadjusted bank balance + $5,232 deposit in transit - $13,479 outstanding checks = $31,356 true cash balance. Alternatively, $33,150 unadjusted book balance - $159 service charge + $735 interest revenue - $2,370 NSF check = $31,356.**

Gross Company established a $250 petty cash fund on January 1, 2016. On March 1, 2016 the fund contained $160 in receipts for miscellaneous expenses and $85 in cash. The entries necessary to replenish the petty cash fund will

Correct: Decrease assets by $165 ***The entry to replenish the petty cash account will decrease assets (cash) by $165, increase miscellaneous expenses by $160 and increase cash short by $5. Total equity will decrease by $165.***

Faust Company uses the perpetual inventory method. Faust sold goods that cost $6,400 for $10,800. If the sale was made on account, the net effect of the sale will:

Correct: Increase total assets by Correct: $4,400. ***The sale will increase assets (accounts receivable) and equity (sales revenue) by $10,800 and it will decrease assets (inventory) and equity (increase cost of goods sold) by $6,400. The net effect is an increase to total assets and total equity of $4,400***

The amount of accounts receivable that is actually expected to be collected is known as:

Correct: Net realizable value Correct: Net realizable value ***Net realizable value is calculated as the general ledger accounts receivable balance (what has been billed to customers, but not yet collected) minus allowance for doubtful accounts (the estimate of what a company believes is uncollectible).***

Which one of the following is not an accurate description of the Allowance for Doubtful Accounts?

Correct: The account is a temporary account ***Allowance for doubtful accounts is a contra account that decreases the net realizable value of a company's receivable. It is increased when a company estimates uncollectible accounts expense***

Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $100 and sold the item to a customer for $170. What effect will the sale have on the company's inventory account?

Correct: The account will decrease by $100 **The sale will cause the inventory account to decrease by $100, the cost of the item sold.**

The Wilson Company purchased $38,000 of merchandise from the Poole Wholesale Company. Wilson also paid $3,100 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system

Correct: Total debits to the inventory account would be $41,000 ***The inventory account would be debited (increased) by both the inventory purchase and the payment for transportation-in.***

Which of the following is considered a product cost?

Correct: Transportation cost on goods shipped to customers ---Transportation cost on goods received from suppliers. ---Transportation cost on goods shipped to customers. ---Salaries paid to employees of a retailer. ---Utility expense for the current month. ***Transportation cost on purchased goods is a product cost that increases the merchandise inventory account, and is reported as a component of cost of goods sold on the income statement***

Product costs are matched against sales revenue

Correct: When the merchandise is sold. ***Product costs are matched against sales revenue (recognized as expenses) when merchandise is sold. The expense is called cost of goods sold.***

At the end of the 2016 accounting period DeYoung Company determined that the market value of its inventory was $79,800. The historical cost of this inventory was $81,400. DeFazio uses the perpetual inventory method. The entry necessary to reduce the inventory to the lower of cost or market will A. decrease assets and decrease gross margin. B. decrease assets and decrease net income. C. increase assets and increase net income. D. decrease assets, gross margin, and net income.

Barker Company paid cash to purchase two identical inventory items. The first purchase cost $18.00 cash and the second cost $20.00 cash. Barker sold one inventory item for $30.00 cash. Based on this information alone, without considering the effect of income tax,: A. cash flow from operating activities is $11.00 assuming a weighted average cost flow. B. cash flow from operating activities is $12.00 assuming a FIFO cost flow. C. cash flow from operating activities is $10.00 assuming a LIFO cost flow. D. the amount of cash flow from operating activities is not affected by the cost flow method.

If a firm is using the lower-of-cost-or-market rule and if a write-down entry is required, which of the following effects will apply? A. Net income will increase. B. Gross margin will decrease. C. Assets will decrease. D. Ggross margin will decrease and assets will also decrease .

In an inflationary environment, A. a company's net income will be higher if it uses LIFO than if it uses FIFO. B. a company's cost of goods sold will be lower if it uses LIFO as opposed to FIFO. C. a company's net income will be the same regardless of whether LIFO or FIFO is used. D. a company's assets will be lower if it uses LIFO as opposed to FIFO cost flow.

Melbourne Company uses the perpetual inventory method. Melbourne purchased 500 units of inventory that cost $4.00 each. At a later date the company purchased an additional 600 units of inventory that cost $5.00 each. If Melboune uses a LIFO cost flow method, and sells 800 units of inventory, the amount of ending inventory appearing on the balance sheet will be: A. $3,800. B. $1.350. C. $1,500. D. $1,200.

Rowan Company has four different categories of inventory. Quantity, cost, market value for each inventory category is shown below: Item, Quantity, Cost Per Unit, Market Value Per Unit 1 220 $4.40 $4.60 2 130 $6.20 $6.00 3 100 $10.00 $9.25 4 25 $20.50 $25.00 The company carries inventory at lower-of-cost-or-market applied to the inventory in aggregate. The implementation of the lower-of-cost-or-market rule would: A. increase assets and equity by $55.50. B. reduce assets and equity by $101.00. C. reduce assets and equity by $79.00. D. leave total assets and equity unchanged.

The inventory records for Radford Co reflected the following Beg Inv May 1 100 units @ 4.00 First Purchase @ May 7 300 units @ 4.40 Second Purchase @ May 17 500 units @ 4.60 Third Purchase @ May 23 100 units @ 4.80 Sales @ May 31 900 units @ 7.80 Determine the amount of gross margin assuming the weighted average cost flow method. A. $3,015 B. $2,412 C. $1,314 D. $2,970

The lower-of-cost-or-market rule: can be applied to A. can be applied to major classes or categories of inventory. B. can be applied to the entire stock of inventory in aggregate. C. can be applied to each individual inventory item D. can be applied to any of these answer choices.

West Corporation's 2015 ending inventory was overstated by $20,000; however, ending inventory for 2016 was correct. Which of the following statements is correct? A. Net income for 2015 is understated. B. Retained earnings at the end of 2016 is overstated. C. Cost of goods sold for 2015 is overstated. D. Cost of goods sold for 2016 is overstated.

When using the gross margin method to estimate inventory, which of the following is a step in the computation? A. Add the amount goods available for sale to estimated cost of goods sold. B. Add estimated gross margin to sales. C. Subtract estimated goods available for sale from beginning inventory. D. Subtract estimated cost of goods sold from the amount of goods available for sale.

Which of the following methods of applying the lower-of-cost-or-market rule will result in the fewest write-downs of inventory? A. Each individual inventory item. B. Average of cost of goods sold for the past three years. C. Major classes or categories of inventory. D. The entire stock of inventory in aggregate.

Zirkle Company understated its ending inventory. Which of the following answers correctly states the effect of the error in the present period? A. Overstatement of total assets and cost of goods sold. B. Overstatement of cost of goods sold and retained earnings. C. Understatement of liabilities and retained earnings. D. Understatement of total assets and gross margin.

60) Melbourne Company uses the perpetual inventory method. Melbourne purchased 500 units of inventory that cost $4.00 each. At a later date the company purchased an additional 600 units of inventory that cost $5.00 each. If Melbourne uses a LIFO cost flow method, and sells 800 units of inventory, the amount of ending inventory appearing on the balance sheet will be:

D) $1,200.

52) The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 100 units @ $ 4.00 First purchase @ May 7 300 units @ $ 4.40 second purchase @ May 17 500 units @ $ 4.60 Third purchase @ May 23 100 units @ $ 4.80 Sales @ May 31 900 units @ $ 7.80 Determine the amount of gross margin assuming the weighted average cost flow method.

D) $2,970

6) The Miller Company earned $190,000 of revenue on account during Year 2. There was no beginning balance in the accounts receivable and allowance accounts. During Year 2, Miller collected $136,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. The net realizable value of Miller's receivables at the end of Year 2 was:

D) $48,300.

29) Rosewood Company made a loan of $16,000 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest revenue that Rosewood would report during the years ending December 31, Year 1 and Year 2, respectively, would be:

D) $720 and $240

48) Anton Co. uses the perpetual inventory method. Anton purchased 400 units of inventory that cost $12.00 each. At a later date the company purchased an additional 600 units of inventory that cost $16.00 each. If Anton uses the FIFO cost flow method and sells 700 units of inventory, the amount of cost of goods sold will be:

D) $9,600.

14) How would accountants estimate the amount of a company's uncollectible accounts expense?

D) All of these answer choices are correct.

13) Houff Company uses the allowance method to account for uncollectible accounts. An account that had been previously written-off as uncollectible was recovered. How would the recovery affect the company's accounting equation?

D) Have no effect on assets, liabilities or equity.

37) Glebe Company accepted a credit card account receivable in exchange for $1,100 of services provided to a customer. The credit card company charges a 5% service charge. The collection of cash from the credit card company when it settles the account receivable balance will act to:

D) None of these answer choices are correct.

7) The balance in Accounts Receivable at the beginning of the period amounted to $16,000. During the period $64,000 of credit sales were made to customers. If the ending balance in Accounts Receivable amounted to $10,000, and uncollectible accounts expense amounted to $4,000, then the amount of cash inflow from customers that would appear in the operating activities section of the cash flow statement would be:

D) None of these answers are correct.

12) Which of the following reflects the effect of the year-end adjusting entry to record estimated uncollectible accounts expense using the allowance method? Assets = Liab. + Equity Rev. Exp. = Net Inc. Cash Flow A. − = NA + − NA − = − − OA B. NA = − + − NA + = − NA C. NA = − + − NA + = − − OA D. − = NA + − NA + = − NA A) Option A B) Option B C) Option C D) Option D Answer: D Explanation: Recording uncollectible accounts expense decreases assets (increases allowance for doubtful accounts) and increases expenses, which decreases net income and equity. It does not affect the statement of cash flows.

D) Option D

27) On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following answers correctly states the effect of Loudoun's recording the reestablishment of the receivable on April 4, Year 2? Assets = Liab. + Equity Re v. − Expenses = Net Inc. Cash Flow A. NA = 1,050 + (1,050 ) NA − 1,050 = (1,050 ) NA B. 1,050 = NA + 1,050 1,050 − NA = 1,050 1,050 OA C. (1,050 ) = NA + (1,050 ) NA − 1,050 = (1,050 ) NA D. NA = NA + NA NA − NA = NA NA

D) Option D

28) On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method of accounting for uncollectible accounts. In February of Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050. Which of the following answers correctly states the effect of recording the collection of the reestablished receivable on April 4, Year 2? Assets = Liab. + Equity Re v. − Expenses = Net Inc. Cash Flow A. NA = NA + NA NA − NA = NA NA B. 1,050 = NA + 1,050 1,050 − NA = 1,050 1,050 OA C. 1,050 = NA + 1,050 NA − (1,050 ) = 1,050 1,050 OA D. NA = NA + NA NA − NA = NA 1,050 OA

D) Option D

46) In an inflationary environment:

D) a company's assets will be lower if it uses LIFO as opposed to FIFO cost flow.

30) The party that issues a promissory note is known as the:

D) borrower and maker.

18) The amount of accounts receivable that is actually expected to be collected is known as the:

D) net realizable value.

9) On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During the year Kincaid reported $72,500 of credit sales. Kincaid wrote off $550 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $74,550. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. Kincaid's entry to recognize the write-off of the uncollectible accounts will:

D) not affect total assets or total equity.

44) Barker Company paid cash to purchase two identical inventory items. The first purchase cost $18.00 cash and the second cost $20.00 cash. Barker sold one inventory item for $30.00 cash. Based on this information alone, without considering the effect of income tax:

D) the amount of cash flow from operating activities is not affected by the cost flow method.

22) The percent of receivables method to estimate uncollectible accounts expense is also known as:

D) the balance sheet approach.

Addison Company experienced an accounting event that affected its financial statements as indicated below: Assets = + Liab. = NA Equity = + Rev. = + Exp. = NA Net Inc. = + Cash Flow = NA Which of the following accounting events could have caused these effects on Addison's statements?

Earned revenue on account. Explanation: Earning revenue on account increases assets (accounts receivable) and increases revenue, which increases net income and equity (retained earnings). It does not affect cash flows.

Blake Company purchased two identical inventory items. The item purchased first cost $30.00, and the item purchased second cost $31.00. Blake sold one of the items for $56.00. Which of the following statements is true?

Ending inventory will be lower if Blake uses weighted average than if FIFO were used. Explanation: If Blake uses weighted average, ending inventory will be $30.50. If the company uses FIFO, ending inventory will be $31.00.

Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $120 and sold the item to a customer for $210. What effect will the sale have on the company's inventory account?

The account will decrease by $120. Explanation: The sale will cause the inventory account to decrease by $120, the cost of the item sold.

Which of the following items is not a product cost?

Transportation cost on goods delivered to customers. Explanation: Transportation cost on goods delivered to customers is a period cost (expense) called transportation-out.

Which of the following is considered a product cost?

Transportation cost on goods received from suppliers. Explanation: Transportation cost on purchased goods is a product cost that increases the merchandise inventory account, and is reported as a component of cost of goods sold on the income statement.

internal controls can be divided into what two categories

accounting controls and administrative controls

The cost of goods sold account is classified as:

an expense. Explanation: Cost of goods sold is the expense recognized when merchandise is sold.

Jackson Company had a net increase in cash from operating activities of $10,000 and a net decrease in cash from financing activities of $4,000. If the beginning and ending cash balances for the company were $5,000 and $15,000, then net cash change from investing activities was:

an inflow or increase of $4,000. Explanation: Beginning cash balance + Increase from operating activities - Decrease from financing activities +/- Increase or decrease from investing activities = Ending cash balance. $5,000 + $10,000 - $4,000 +/- Increase or decrease from investing activities = $15,000. $4,000 = Increase in investing activities.

issued stock

authorized stock that has been sold to the public

where are libailities

balance sheet

going concern

companies are expected to pay their obligations in full. accounts and notes payable are therefore reported at face value

the year-end adjusting entry to recognize uncollectible accounts expense will

decrease assets and decrease equity

double taxation

distributed corporate profits are taxed twice; first when income is reported on the corporations income tax return. second when distributions are reported on individual owners

which of the following is not one of the purposes of an internal control system

ensuring that the company is using the most effective marketing plan

GAAP

general acceptable accounting principles are measurement rules for financial accounting

Hoover Company purchased two identical inventory items. The item purchased first cost $35.00. The item purchased second cost $38.50. Then Hoover sold one of the inventory items for $60. Based on this information, the amount of:

gross margin is $23.25 if Hoover uses the weighted average cost flow method. Explanation: If Hoover uses LIFO, cost of goods sold will be $38.50 (most recent purchase) and ending inventory will be $35.00, not $38.50. If Hoover uses weighted average, the weighted average cost per unit is $36.75. Therefore, gross margin will be $23.25 ($60 Sales - $36.75 Cost of goods sold). If Hoover uses FIFO, cost of goods sold will be $35.00 (earliest purchase), not $38.50.

gross margin is $28.00 if Hoover uses the weighted average cost flow method. Explanation: If Hoover uses LIFO, cost of goods sold will be $35.00 (most recent purchase) and ending inventory will be $33.00, not $35.00. If Hoover uses weighted average, the weighted average cost per unit is $34.00. Therefore, gross margin will be $28.00 ($62.00 Sales - $34.00 Cost of goods sold). If Hoover uses FIFO, cost of goods sold will be $33.00 (earliest purchase), not $35.00.

Jack's Snow Removal Company received a cash advance of $12,300 on December 1, Year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, Year 1, to recognize the partial expiration of the contract will

increase equity by $4,100. Explanation: The year-end adjustment to recognize one month's work on the three-month contract results in a $4,100 decrease in liabilities (unearned revenue) and an increase in equity (retained earnings due to recognizing revenue).

when a company loans another company money

it shows a cash inflow of that amount of money on its cash flow statement

price earning ratio

market price of stock/ earnings per share

earnings per share

net income/ common shares o/s

what items are on the income statement

revenues, expenses, net income

which policy or procedure covers fraud or theft

separation of duties

the amount of cash flow from operating activities is not affected by the cost flow method. Explanation: Regardless of the cost flow assumption, Barker reported outflow of $38.00 for the purchases of the two items and inflow of $30.00 for the sale of one item.

which of the following is not a generally recognized internal control procedure

the minimization of labor cost

Retained Earnings at the beginning and ending of the accounting period was $550 and $1,200, respectively. If revenues were $2,100 and dividends paid to stockholders were $450, expenses for the period must have been:

$1,000. Explanation: Beginning retained earnings + Revenues - Expenses - Dividends = Ending retained earnings. $550 + $2,100 - Expenses - $450 = $1,200. Expenses = $1,000.

Retained Earnings at the beginning and ending of the accounting period was $600 and $1,300, respectively. If revenues were $2,300 and dividends paid to stockholders were $500, expenses for the period must have been:

$1,100. Explanation: Beginning retained earnings + Revenues - Expenses - Dividends = Ending retained earnings. $600 + $2,300 - Expenses - $500 = $1,300. Expenses = $1,100.

On January 1, Year 2, Grande Company had a $65,400 balance in the Accounts Receivable account and a $1,700 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $162,000 of service on account. The company collected $178,900 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. The amount of uncollectible accounts expense recognized on the Year 2 income statement is:

$1,620. Explanation: $162,000 sales on account x 1% = $1,620 uncollectible accounts expense.

Jason Company paid $6,600 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of

$1,650; $6,600. Explanation: $6,600 x 3/12 = $1,650 rent expense. $6,600 payment on 10/1/15 is a cash outflow for rent.

Nelson Company experienced the following transactions during Year 1, its first year in operation. 1. Issued $7,400 of common stock to stockholders. 2. Provided $3,700 of services on account. 3. Paid $1,950 cash for operating expenses. 4. Collected $2,600 of cash from accounts receivable. 5. Paid a $170 cash dividend to stockholders. The amount of net income recognized on Nelson Company's Year 1 income statement is:

$1,750. Explanation: $3,700 revenue - $1,950 expenses = $1,750 net income.

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $62,000 2) borrowed $36,000 from its bank 3) provided consulting services for $60,000 cash 4) paid back $26,000 of the bank loan 5) paid rent expense for $14,500 6) purchased equipment for $23,000 cash 7) paid $4,100 dividends to stockholders 8) paid employees' salaries of $32,000 What is Yowell's notes payable balance at the end of Year 1?

$10,000. Explanation: Beginning notes payable balance $0 + $36,000 loan - $26,000 repayment = $10,000 ending balance.

Assume the perpetual inventory method is used. 1) The company purchased $13,300 of merchandise on account under terms 2/10, n/30. 2) The company returned $2,800 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $20,600 cash. The amount of gross margin from the four transactions is:

$10,310. Explanation: Cost of goods sold = ($13,300 - $2,800) x 0.98 = $10,290. Sales revenue $20,600 - Cost of goods sold $10,290 = $10,310.

Assume the perpetual inventory method is used. 1) The company purchased $13,900 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,400 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $21,800 cash. The net cash flow from operating activities as a result of the four transactions is:

$11,510. Explanation: Cash outflow for inventory purchase: ($13,900 - $3,400) x 0.98 = $10,290. Cash inflow from inventory sale: $21,800. Net cash flow = $21,800 - $10,290 = $11,510.

The balance sheet of the Algonquin Company reported assets of $50,000, liabilities of $22,000 and common stock of $15,000. Based on this information only, the amount or balance for retained earnings must be:

$13,000. Explanation: Assets = Liabilities + Equity. Equity includes common stock and retained earnings. $50,000 = $22,000 + $15,000 + Retained earnings. Retained earnings = $13,000.

on january 1, year 2, Grande Company had a $16,000 balance in the accounts receivable account and a zero balance in the allowance for doubtful accounts. during year 2, Grande provided $104,000 of service on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account. the amount of uncollectible accounts expense recognized on the year 2 income statement is

$2,080

On January 1, Year 2, Grande Company had a $16,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $104,000 of service on account. The company collected $97,000 cash from accounts receivable. Uncollectible accounts are estimated to be 2% of sales on account. The amount of uncollectible accounts expense recognized on the Year 2 income statement is:

$2,080. Explanation: $104,000 sales on account x 2% = $2,080 uncollectible accounts expense.

At the end of Year 2, retained earnings for the Baker Company was $2,550. Revenue earned by the company in Year 2 was $2,800, expenses paid during the period were $1,500, and dividends paid during the period were $900. Based on this information alone, retained earnings at the beginning of Year 2 was:

$2,150. Explanation: Beginning Retained Earnings + Revenue - Expenses - Dividends = Ending Retained Earnings. Beginning Retained Earnings + $2,800 - $1,500 - $900 = $2,550. Beginning Retained Earnings = $2,150.

Nelson Company experienced the following transactions during Year 1, its first year in operation. 1. Issued $8,400 of common stock to stockholders. 2. Provided $4,700 of services on account. 3. Paid $2,200 cash for operating expenses. 4. Collected $3,100 of cash from accounts receivable. 5. Paid a $220 cash dividend to stockholders. The amount of net income recognized on Nelson Company's Year 1 income statement is:

$2,500. Explanation: $4,700 revenue - $2,200 expenses = $2,500 net income.

On January 1, Year 2, the Accounts Receivable balance was $24,200 and the balance in the Allowance for Doubtful Accounts was $2,500. On January 15, Year 2, an $710 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is:

$21,700. Explanation: $24,200 - $710 = $23,490 accounts receivable balance after the write-off. $2,500 - $710 = $1,790 allowance balance after the write-off. $23,490 - $1,790 = $21,700 net realizable value after the write-off.

The Miller Company earned $103,000 of revenue on account during Year 2. There was no beginning balance in the accounts receivable and allowance accounts. During Year 2, Miller collected $72,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. The net realizable value of Miller's receivables at the end of Year 2 was:

$27,910. Explanation: $0 beginning balance + $103,000 revenue on account - $72,000 collections = $31,000 ending accounts receivable balance. $0 beginning balance + $3,090 uncollectible accounts expense - $0 write-offs = $3,090 ending allowance for doubtful accounts balance. $31,000 - $3,090 = $27,910 net realizable value.

Sheldon Company began Year 1 with $1,800 in its supplies account. During the year, the company purchased $5,300 of supplies on account. The company paid $2,700 on accounts payable by year end. At the end of Year 1, Sheldon counted $3,100 of supplies on hand. Sheldon's financial statements for Year 1 would show:

$3,100 of supplies; $4,000 of supplies expense. Explanation: $3,100 of supplies on hand is the supplies asset on the balance sheet. $1,800 beginning balance + $5,300 of supplies purchased - $3,100 ending balance = $4,000 supplies expense.

Warren Enterprises had the following events during Year 1: The business issued $27,000 of common stock to its stockholders. The business purchased land for $19,000 cash. Services were provided to customers for $23,000 cash. Services were provided to customers for $12,000 on account. The company borrowed $23,000 from the bank. Operating expenses of $19,000 were incurred and paid in cash. Salary expense of $1,500 was accrued. A dividend of $11,000 was paid to the stockholders of Warren Enterprises. Assuming the company began operations during Year 1, the amount of retained earnings as of December 31, Year 1 would be:

$3,500. Explanation: $0 beginning balance + $35,000 revenue - $20,500 expenses - $11,000 dividends = $3,500 ending balance.

Revenue on account amounted to $7,200. Cash collections of accounts receivable amounted to $4,700. Expenses for the period were $3,700. The company paid dividends of $1,250. Net income for the period was

$3,500. Explanation: Revenue $7,200 - Expenses $3,700 = $3,500 Net Income.

Revenue on account amounted to $8,000. Cash collections of accounts receivable amounted to $5,300. Expenses for the period were $4,100. The company paid dividends of $1,450. Net income for the period was

$3,900. Explanation: Revenue $8,000 - Expenses $4,100 = $3,900 Net Income.

on january 1, year 2, the accounts receivable balance was $37,000 and the balance in the allowance for doubtful accounts was $2,800. on January 15, year 2, an $800 uncollectible account was written-off. the net realizable value of accounts receivable immediately after the write-off is

$34,200

On January 1, Year 2, the Accounts Receivable balance was $37,000 and the balance in the Allowance for Doubtful Accounts was $2,800. On January 15, Year 2, an $800 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is:

$34,200. Explanation: $37,000 - $800 = $36,200 accounts receivable balance after the write-off. $2,800 - $800 = $2,000 allowance balance after the write-off. $36,200 - $2,000 = $34,200 net realizable value after the write-off.

Rosewood Company made a loan of $7,600 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest revenue that Rosewood would report during the years ending December 31, Year 1 and Year 2, respectively, would be:

$342 and $114. Explanation: $7,600 x 6% x 9/12 months = $342 interest revenue in April - December, Year 1. $7,600 x 6% x 3/12 months = $114 interest revenue in January - March, Year 2.

Stosch Company's balance sheet reported assets of $97,000, liabilities of $26,000 and common stock of $23,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $62,000 and Stosch paid a $25,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following?

$39,000. Explanation: If assets on December 31, Year 1 totaled $97,000, total claims (including liabilities, common stock, and retained earnings) on that date must have also been $97,000. If liabilities were $26,000 and common stock was $23,000, retained earnings on December 31, Year 1 must have been $48,000. At the end of Year 2, the company reported $62,000 in retained earnings, a $14,000 increase. During Year 2, Stosch paid a $25,000 cash dividend, which reduced retained earnings. Therefore, Year 2 net income must have been $14,000 greater than the dividend paid. $25,000 + $14,000 = $39,000.

Sheldon Company began Year 1 with $2,300 in its supplies account. During the year, the company purchased $6,800 of supplies on account. The company paid $3,200 on accounts payable by year end. At the end of Year 1, Sheldon counted $4,100 of supplies on hand. Sheldon's financial statements for Year 1 would show:

$4,100 of supplies; $5,000 of supplies expense. Explanation: $4,100 of supplies on hand is the supplies asset on the balance sheet. $2,300 beginning balance + $6,800 of supplies purchased - $4,100 ending balance = $5,000 supplies expense.

Domino Company uses the aging of accounts receivable method to estimate uncollectible accounts expense. Domino began Year 2 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $43,430 and $3,380, respectively. During the year, the company wrote off $2,590 in uncollectible accounts. In preparation for the company's Year 2 estimate, Domino prepared the following aging schedule: Number of days past due; Receivables amount; % Likely to be uncollectible Current; $68,000; 1% 0-30; $26,300; 5% 31-60; $6,560; 10% 61-90; $3,320; 25% Over 90; $3,000; 50% Total; $107,180 What will Domino record as Uncollectible Accounts Expense for Year 2?

$4,191. Explanation: ($68,000 x 1%) + ($26,300 x 5%) + ($6,560 x 10%) + ($3,320 x 25%) + ($3,000 x 50%) = $4,981 estimated ending allowance balance. $3,380 beginning allowance balance + uncollectible accounts expense - $2,590 write-offs = $4,981 ending allowance balance. Uncollectible accounts expense = $4,981 - $3,380 + $2,590 = $4,191.

Revenue on account amounted to $3,400. Cash collections of accounts receivable amounted to $3,100. Cash paid for expenses was $2,700. The amount of employee salaries accrued at the end of the year was $500. Cash flow from operating activities was

$400. Explanation: $3,100 collected from customers - $2,700 paid for expenses = $400. Revenue earned on account and accrued salaries are not cash flow activities.

Stosch Company's balance sheet reported assets of $102,000, liabilities of $27,000 and common stock of $24,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $66,000 and Stosch paid a $26,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following?

$41,000. Explanation: If assets on December 31, Year 1 totaled $102,000, total claims (including liabilities, common stock, and retained earnings) on that date must have also been $102,000. If liabilities were $27,000 and common stock was $24,000, retained earnings on December 31, Year 1 must have been $51,000. At the end of Year 2, the company reported $66,000 in retained earnings, a $15,000 increase. During Year 2, Stosch paid a $26,000 cash dividend, which reduced retained earnings. Therefore, Year 2 net income must have been $15,000 greater than the dividend paid. $26,000 + $15,000 = $41,000.

the miller company earned $190,000 of revenue on account during year 2. there was no beginning balance in the accounts receivable and allowance accounts. during year 2, Miller collected $136,000 of cash from its receivables accounts. the company estimates that it will be unable to collect 3% of its sales on account

$48,300

the Miller Company earned $190,000 of revenue on account during year 2. there was no beginning balance in the accounts receivable and allowance accounts. during year 2, Miller collected $136,000 of cash from its receivables accounts. the company estimates that it will be unable to collect 3% of its sales on account. the amount of uncollectible accounts expense recognized on the year 2 income statement was

$5,700

Jason Company paid $2,100 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of

$525; $2,100. Explanation: $2,100 x 3/12 = $525 rent expense. $2,100 payment on 10/1/15 is a cash outflow for rent.

On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $62,600 and $1,100, respectively. During the year Kincaid reported $148,000 of credit sales. Kincaid wrote off $1,150 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $154,500. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. The net realizable value of receivables appearing on Kincaid's Year 2 balance sheet will amount to:

$53,520. Explanation: $62,600 beginning balance + $148,000 credit sales - $154,500 collections - $1,150 write-offs = $54,950 ending accounts receivable balance. $1,100 beginning allowance balance + $1,480 uncollectible account expense - $1,150 write-offs = $1,430 ending allowance balance. $54,950 accounts receivable - $1,430 allowance = $53,520 net realizable value.

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $1,450 cash from the issue of common stock. 2) Borrowed $920 from a bank. 3) Earned $1,100 of revenues cash. 4) Paid expenses of $350. 5) Paid a $150 dividend. During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.) 1) Issued an additional $825 of common stock. 2) Repaid $570 of its debt to the bank. 3) Earned revenues of $1,250 cash. 4) Incurred expenses of $560. 5) Paid dividends of $200. Packard Company's net cash flow from financing activities for Year 2 is:

$55 inflow. Explanation: $825 inflow from stock - $570 outflow for loan repayment - $200 outflow for dividends = $55 inflow.

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $21,000 Liabilities = ? Common Stock = $5,100 Revenue = $11,200 Dividends = $800 Beginning Retained Earnings = $3,800 Ending Retained Earnings = $7,100 Based on this information, the amount of expenses on Calloway's income statement was

$7,100. Explanation: Beginning retained earnings + Revenue - Expenses - Dividends = Ending retained earnings. $3,800 + $11,200 - Expenses - $800 = $7,100. Expenses = $7,100.

Sanchez Company engaged in the following transactions during Year 1: 1) Started the business by issuing $12,100 of common stock for cash. 2) The company paid cash to purchase $7,400 of inventory. 3) The company sold inventory that cost $4,800 for $9,650 cash. 4) Operating expenses incurred and paid during the year, $4,300. Sanchez Company engaged in the following transactions during Year 2: 1) The company paid cash to purchase $10,400 of inventory. 2) The company sold inventory that cost $9,000 for $16,250 cash. 3) Operating expenses incurred and paid during the year, $5,300. Note: Sanchez uses the perpetual inventory system. Sanchez's gross margin for the Year 2 is:

$7,250. Explanation: $16,250 Sales - $9,000 COGS = $7,250 Gross margin.

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $28,000 Liabilities = ? Common Stock = $5,800 Revenue = $12,600 Dividends = $1,150 Beginning Retained Earnings = $4,150 Ending Retained Earnings = $7,800 Based on this information, the amount of expenses on Calloway's income statement was

$7,800. Explanation: Beginning retained earnings + Revenue - Expenses - Dividends = Ending retained earnings. $4,150 + $12,600 - Expenses - $1,150 = $7,800. Expenses = $7,800.

Ballard Company uses the perpetual inventory system. The company purchased $9,100 of merchandise from Andes Company under the terms 4/10, net/30. Ballard paid for the merchandise within 10 days and also paid $360 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $17,200 cash. The amount of gross margin for this merchandise is:

$8,104. Explanation: Sales $17,200 - Cost of goods sold ($9,100 x 0.96 + $360) = $8,104 Gross margin.

The following account balances were drawn from the financial statements of Grayson Company: Cash = $5,300 Accounts receivable = $2,300 Land = $8,900 Accounts payable = $1,700 Common stock = ? Retained earnings, Jan. 1 = $3,600 Revenue = $10,400 Expenses = $7,700 Based on the above information, what is the balance of Common Stock for Grayson Company?

$8,500. Explanation: Assets ($5,300 + $2,300 + $8,900) = Liabilities ($1,700) + Equity. Equity = $14,800. $14,800 = Common Stock + Retained Earnings ($3,600 + $10,400 - $7,700). $14,800 = Common Stock + $6,300. Common Stock = $8,500.

Ballard Company uses the perpetual inventory system. The company purchased $9,800 of merchandise from Andes Company under the terms 2/10, net/30. Ballard paid for the merchandise within 10 days and also paid $430 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $18,600 cash. The amount of gross margin for this merchandise is:

$8,566. Explanation: Sales $18,600 - Cost of goods sold ($9,800 x 0.98 + $430) = $8,566 Gross margin.

Assume the perpetual inventory method is used. 1) Green Company purchased merchandise inventory that cost $17,900 under terms of 2/10, n/30 and FOB shipping point. 2) The company paid freight cost of $790 to have the merchandise delivered. 3) Payment was made to the supplier within 10 days. 4) All of the merchandise was sold to customers for $27,300 cash and delivered under terms FOB shipping point with freight cost amounting to $590. The gross margin from these transactions of Green Company is

$8,968. Explanation: $27,300 Sales - [($17,900 x 0.98) + $790] Cost of goods sold = $8,968 Gross margin.

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $22,000 Liabilities = ? Common Stock = $5,200 Revenue = $11,400 Dividends = $850 Beginning Retained Earnings = $3,850 Ending Retained Earnings = $7,200 The amount of liabilities reported on the end-of-period balance sheet was:

$9,600. Explanation: Assets = Liabilities + Common Stock + Ending Retained Earnings. $22,000 = Liabilities + $5,200 + $7,200. Liabilities = $9,600.

on january 1, year 2, Grande Company had a $16,000 balance in the accounts receivable account and a zero balance in the allowance fr doubtful accounts account. during year 2, Grande provided $104.000 of service on account. the company collected $97,000 cash from accounts receivable. uncollectible accounts are estimated to be 2% of sales on account. the amount of gash flow from operating activities that would appear on the year 2 statement of cash flows is

$97,000

1) The year-end adjusting entry to recognize uncollectible accounts expense will:

A) decrease assets and decrease equity.

Account numbers 3, 4, 7, 8, and 9. Explanation: Cost of goods sold, transportation-out, selling expense, loss on the sale of land, and sales will all appear on the income statement.

The recognition of an expense may be accompanied by which of the following?

An increase in liabilities. Explanation: Recognizing an expense may be accompanied by an increase in liabilities (i.e. accounts payable, salaries payable) or a decrease in assets (i.e. cash, prepaid rent or insurance).

A company purchased inventory on account. If the perpetual inventory method is used, which of the following choices accurately reflects how the purchase affects the company's financial statements?

Assets = + Liab. = + Equity = NA Rev. = NA Exp. = NA Net Inc. = NA Cash Flow = NA Explanation: Purchasing merchandise inventory on account increases assets (merchandise inventory) and increases liabilities (accounts payable). It does not affect the income statement or the statement of cash flows.

Llewelyn Company paid the amount due on a purchase of merchandise on account. Llewelyn uses the perpetual inventory system. Which of the following answers reflects the effect of the payment on the financial statements?

Assets = - Liab. = - Equity = NA Rev. = NA Exp. = NA Net Inc. = NA Cash Flow = - OA Explanation: Payment of the amount due on account will decrease assets (cash) and decrease liabilities (accounts payable). It will not affect the income statement, but will be reported as a cash outflow for operating activities.

Becker's Bookstore shipped merchandise FOB destination to a customer. If the transportation costs are paid in cash, which of the following choices reflects how this transaction will affect the company's financial statements?

Assets = - Liab. = NA Equity = - Rev. = NA Exp. = + Net Inc. = - Cash Flow = - OA Explanation: FOB destination means the seller is responsible for the freight cost, which is called transportation-out. Transportation-out is a period cost that decreases assets (cash) and increases expenses (transportation-out), which decreases net income and equity. It is reported as a cash outflow for operating activities.

Which of the following reflects the effect of the year-end adjusting entry to record estimated uncollectible accounts expense using the allowance method?

Assets = - Liab. = NA Equity = - Rev. = NA Exp. = + Net Inc. = - Cash Flow = NA Explanation: Recording uncollectible accounts expense decreases assets (increases allowance for doubtful accounts) and increases expenses, which decreases net income and equity. It does not affect the statement of cash flows.

Jantzen Company recorded employee salaries earned but not yet paid. Which of the following represents the effect of this transaction on the financial statements?

Assets = NA Liab. = + Equity = - Rev. = NA Exp. = + Net Inc. = - Cash Flow = NA Explanation: Accruing salaries expense increases liabilities (salaries payable) and increases expenses, which decreases net income and equity (retained earnings). It does not affect cash flows.

Which of the following choices accurately reflects how the recording of accrued salary expense affects the financial statements of a business?

Assets = NA Liab. = + Equity = - Rev. = NA Exp. = + Net Inc. = - Cash Flow = NA Explanation: Accruing salary expense increases liabilities (salaries payable) and increases expenses, which decreases net income and equity (retained earnings). It does not affect cash flows.

Which of the following items appears in the investing activities section of the statement of cash flows?

Cash outflow for the purchase of land. Explanation: Purchasing land (a long-lived asset) for cash is an investing activity. Issuing common stock and paying dividends are both financing activities. Cash inflow from interest revenue is an operating activity.

Which of the following items is an example of revenue?

Cash received from customers at the time services were provided. Explanation: Cash received from providing services to customers is an example of revenue, and is an asset source transaction. Cash received from a bank loan results in a liability, notes payable. Cash investments made by owners increase the stockholders' equity account common stock. Cash received from the sale of land for its original selling price is an asset exchange transaction that decreases one asset, land, and increases another asset, cash.

2) On January 1, Year 2, the Accounts Receivable balance was $37,000 and the balance in the Allowance for Doubtful Accounts was $2,800. On January 15, Year 2, an $800 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is:

D) $34,200.

Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $72,000 2) borrowed $41,000 from its bank 3) provided consulting services for $70,000 cash 4) paid back $31,000 of the bank loan 5) paid rent expense for $17,000 6) purchased equipment for $28,000 cash 7) paid $4,600 dividends to stockholders 8) paid employees' salaries of $37,000 What is Yowell's net cash flow from operating activities?

Inflow of $16,000. Explanation: $70,000 inflow from consulting services - $17,000 outflow for rent expense - $37,000 outflow for salaries expense = $16,000 inflow.

Which of the following events would not require an end-of-year adjusting entry?

Providing services on account. Explanation: Providing services on account does not require an end-of-year adjusting entry. Accounts receivable is increased when services are provided on account and is decreased when payment is received from customers. Supplies and prepaid rent both require end-of-year adjusting entries to recognize expense.

Kenyon Company experienced a transaction that had the following effect on the financial statements: Assets = - Liab. = - Equity = NA Rev. = NA Exp. = NA Net Inc. = NA Cash Flow = NA Which transaction would have this effect?

Return to a supplier of merchandise purchased on account. Explanation: A purchase return would decrease assets (merchandise inventory) and decrease liabilities (accounts payable), but would not affect the income statement or the statement of cash flows.

Which of the following accounts would not appear on a balance sheet?

Service Revenue. Explanation: Service revenue is an income statement account. Unearned revenue, despite having the word "revenue" in its title, is a liability account that appears on the balance sheet.

Santa Fe Company was started on January 1, Year 1, when it acquired $8,600 cash by issuing common stock. During Year 1, the company earned cash revenues of $4,400, paid cash expenses of $3,050, and paid a cash dividend of $600. Based on this information,

The Year 1 statement of cash flows would show net cash inflow from financing activities of $8,000. Explanation: $8,600 cash inflow from issuing stock - $600 cash outflow for dividends = $8,000 net cash inflow from financing activities.

Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $160 and sold the item to a customer for $290. What effect will the sale have on the company's inventory account?

The account will decrease by $160. Explanation: The sale will cause the inventory account to decrease by $160, the cost of the item sold.

Galaxy Company sold merchandise costing $2,200 for $3,400 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation?

Total assets and total equity decrease by $1,200. Explanation: The sales return will increase assets (inventory) and decrease cost of goods sold, which will increase equity, by $2,200 each. It will also decrease assets (cash) and decrease sales revenue, which will decrease equity, by $3,400 each. The net effect is a decrease in total assets and total equity of $1,200.

Galaxy Company sold merchandise costing $3,100 for $5,200 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation?

Total assets and total equity decrease by $2,100. Explanation: The sales return will increase assets (inventory) and decrease cost of goods sold, which will increase equity, by $3,100 each. It will also decrease assets (cash) and decrease sales revenue, which will decrease equity, by $5,200 each. The net effect is a decrease in total assets and total equity of $2,100.

The Wilson Company purchased $35,000 of merchandise from the Poole Wholesale Company. Wilson also paid $2,800 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system.

Total increases to the inventory account would be $37,800. Explanation: When the perpetual system is used, the inventory account is increased when inventory is purchased; that account is also increased when the company (as the buyer of the merchandise) pays the transportation costs.

Jack's Snow Removal Company received a cash advance of $15,000 on December 1, Year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, Year 1, to recognize the partial expiration of the contract will

increase equity by $5,000. Explanation: The year-end adjustment to recognize one month's work on the three-month contract results in a $5,000 decrease in liabilities (unearned revenue) and an increase in equity (retained earnings due to recognizing revenue).

Faust Company uses the perpetual inventory method. Faust sold goods that cost $6,500 for $11,000. If the sale was made on account, the net effect of the sale will:

increase total assets by $4,500. Explanation: The sale will increase assets (accounts receivable) and equity (sales revenue) by $11,000 and it will decrease assets (inventory) and equity (increase cost of goods sold) by $6,500. The net effect is an increase to total assets and total equity of $4,500.

internal controls

policies and procedures used to provide reasonable assurance that the objectives of an enterprise will be accomplished

whats the purpose of accrual basis of accounting

revenues are reported on income statement when earned under accounts receivable then true profit to owners equity or retained earnings

If a company's total assets increased while liabilities and common stock were unchanged, then:

revenues were greater than expenses. Explanation: If a company's total assets increased while liabilities and common stock were unchanged, retained earnings must have increased. In order for retained earnings to increase, the company must have reported net income as a result of revenues exceeding expenses.

authorized stock

states approve the maximum number of shares of stock corporations are legally permitted to issue

outstanding stock

stock owned by investors outside the corporation (total stock issued-treasury stock)

what is not an accurate description of allowance for doubtful accounts

the account is an income statement account

which of the following is an internal control procedure used to safeguard a company's assets

timely deposits of cash receipts into a checking account, separation of duties, reconciliation of the bank statement

Li Company paid cash to purchase land. As a result of this accounting event:

total assets were unaffected. Explanation: Paying cash for land is an asset exchange transaction that increases one asset (land) and decreases another asset (land). The result is no overall change in total assets.

exam1

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